How much can I borrow on a guarantor mortgage
Published 13th January 2019
This is just an indication, to work things out accurately it really depends on the lender as every one of them calculates affordability differently. In order to work it out its important to understand how lenders affordability models work…
How guarantor mortgage affordability works:
The whole process of applying and qualifying for a guarantor mortgage is often not as straightforward as many like it to be. Although the guarantor isn’t actually on the mortgage deeds and doesn’t own the property, the guarantor is still assessed in the same way as an applicant (credit score, income, age, other commitments such as mortgages, credit cards, loans etc).
In order to work out how much the guarantor can afford, lenders look at both the income and outgoings of the guarantor. Currently in the UK, guarantor income is assessed on employment basic income, overtime, bonuses, and self-employment income (usually 2-3 years trading is required as a minimum). At present, if you wanted an estimate of the maximum available borrowing on a guarantor mortgage, UK lenders tend to multiply the income by 4 (e.g. A salary of £30,000 pa would elicit a maximum lend of approximately £120,000). There are however, some lenders that can lend up to 5x income. The borrowers personal income usually isn't included in any calculations.
The mortgage term (length of the mortgage in years), is usually limited to the guarantor’s circumstances because more often than not, the guarantor is older than the main borrower. Most lenders will restrict the mortgage term to the oldest applicants retirement age (say, 65), and therefore in some cases when a 25 year old couple want a 40 year mortgage but their guarantor is 40, they have to limit it to 25 years to fit in with the guarantors retirement age. Consequently, shortening the term by a significant number of years can make the monthly payments much more costly every month.
However, there are a few lenders that understand this problem and will allow the full mortgage term applied for, as long as the guarantor is removed within a certain amount of years, for example. Bear in mind that some lenders will cap guarantor mortgage terms to 25/30 years regardless of age, so this must be factored in when considering your monthly budget.
Borrowers sometimes don’t need ANY income:
A major benefit to having a mortgage with guarantor is that in some cases, the borrower doesn’t need to prove ANY income at all. This can help people like the newly self-employed, university students, or even the unemployed to get on the property ladder. Mortgages with guarantor arrangements are becoming increasingly accessible for first time buyers or home movers upsizing to a bigger property, as lenders start to push back into the market they retreated from 4 or 5 years ago. Which mortgage is right for you will depend on a number of factors, so make an enquiry and one of the experts can find you the best guarantor mortgages 2014 has to offer. Make an enquiry now…
If you want to apply for a mortgage with a guarantor, maybe you want to know if you’re eligible or you’re looking for the best deals, please get in touch and one of the experts will be in touch ASAP. If you require help immediate assistance please call 0800 304 7880.